27 April 2016
By Linda Kaucher, StopTTIP UK
Liberalisation means opening investment opportunities to foreign and transnational investors. While the word is tossed around by journalists and politicians, it is rarely explained. Thus people don’t get the chance to grasp the meaning, to connect it to their own experience, or to recognise that the UK’s policy of total liberalisation is a political choice – and that there are other options. Part of the problem is that prestigious BBC journalists don’t really grasp this meaning themselves.
Since Thatcher, liberalisation has been fundamental to the UK economy, the essential element of our ‘very open economy’, always touted as a plus. Liberalisation is so much taken for granted that when there are investment opportunities, such as a UK private sector sell-off, like Cadbury’s; or an investment opportunity arising from privatising or part-privatising a public service (e.g. NHS contracts, water service sell-offs or PFI schemes); the liberalisation of these investment opportunities is not even mentioned.
This political choice is the reason why hardly any UK brands are UK-owned any more, and why, with the privatisation of public services, it is much harder to reinstate public provision when foreign or transnational investors are involved.
Would national ownership – as opposed to liberalised ownership – be different?
To be clear, I am not referring here to ‘nationalising’ as in shifting operations from private ownership to full government ownership or control, a demand that many on the Left have made as an antidote to everything that is currently wrong with the nature of our economy.
While there is certainly a case for nationalisation in some areas, and other forms of non-private ownership, it is likely that the UK, in the near or more distant future, will have a mixed economy including private ownership. What I am discussing here is the nature of that private ownership and whether it would be different if it was not, or was to a lesser extent, liberalised, raising the possibility of encouraging, boosting or advantaging national ownership and investment.
The decision of Tata Steel to either close or offload its investment here was made on the basis of shareholder interests. Admittedly, the company is experiencing significant ongoing losses, with causes outside of the UK. However it was always obvious that when the going got rough, Tata would abandon its higher wage UK production and maintain lower wage, home country, Indian production (though the Tata empire is not so keen on paying home-country taxes).
Would national ownership lead to a different situation? Would there be wider considerations than just shareholders’ interests? Would there be broader expectations of a national company but also broader support available for it? Would there be a more multifaceted consideration of the situation, e.g. for workers, for the supply companies, for the social context role of the firm? Would there be more training within the firm if it were part of the national industrial fabric, taking account of current and future workers and their skills and the advantages of a more wholistic societal role for the firm?
The ‘liberalisation’ I am discussing here is the liberalisation of ‘services’, which includes financial services and investment. Just about everything is a ‘service’ now because services providers get privileged treatment, especially when service liberalisations are committed to trade agreements. It was transnational financial corporations such as American Express and Citicorp that lobbied for ‘services’ to be included in the trade agenda, resulting in the General Agreement on Trade in Services (GATS) being included in the World Trade Organisation’s (WTO) agreements, at the point when the WTO was set up.
The trade-in-services commitments that countries make in international trade deals are to open a service to transnational and foreign investments and to keep it open in that way.
As part of the commitment, two corporate-friendly rules also kick in. These are the Market Access and National Treatment rules. The Market Access rule means that when a country has liberalised and committed a service to a trade deal, it cannot limit the number of suppliers or the number of services that they offer, such as newly devised financial services. The National Treatment rule means that a government must treat any foreign investor in that service at least as well as any domestic investor – including access to any subsidies.
With trade agreement commitments, public service privatisations become harder to reverse. In effect, liberalisations prevent reversals of privatisations.
The liberalisation of trade-in-goods, applicable at the point where goods actually cross borders, is about reducing tariffs (import taxes) and government subsidies to home country producers. But all other aspects of ‘goods’ e.g. distribution, labour supply, credit and insurance, are ‘services’, subject to trade-in-services provisions, which, as pointed out, are about the rights of transnational and foreign corporations.
Liberalisation is the basis of the international trade agenda and of globalisation. It allows corporations to become mega-corporations. The City of London, i.e. transnational financial services, ensure that the UK has a completely liberalised economy, as a global model, in order to have as much of the world as possible open to international financial services business and for access to investment world-wide.
Can we, should we, or do we want to pull back on that? Should the interests of the transnational financial services industry continue to be the priority of UK government policy, as is currently the case?
How we shift from the political choice of complete liberalisation to a different option, with different priorities, is for debate. But the starting point is naming and explaining liberalisation, its implications and the fact that it is a political choice and that there are other options. Only when these realities are generally recognised, can broadly-understood, broadly-supported change become a possibility.